How the Democratic and GOP Platforms Clash Over Social Security Reform

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The new Democratic national platform approved this week in Philadelphia includes seismic changes in the Social Security programs. It includes a substantial increase in the average benefits to seniors while requiring wealthier Americans to pay a much larger share of the overall cost.

The platform, heavily influenced by Sanders, who calls it the “most progressive” in the party’s history, in close collaboration with Hillary Clinton’s camp, rejects any notion that Social Security should be restructured to prevent a cash crisis or a federal debt crisis.

Instead, the newly minted campaign document would extend the Social Security trust fund’s solvency 50 years or more by lifting a cap on the payroll tax to force wealthier Americans to assume a much larger share of the program’s cost. It would also increase average monthly benefits to seniors and recast cost-of-living adjustments to make it more advantageous to seniors with substantial medical expenses.

Although the platform document is fuzzy on the specifics of these changes, Sanders has proposed a $65 a month average increase in Social Security benefits, higher cost of living adjustments and lifting more seniors out of poverty by boosting the minimum benefits paid to low-income seniors.

“Democrats are proud to be the party that created Social Security, one of the nation’s most successful and effective programs. Without Social Security, nearly half of America’s seniors would be living in poverty,” the platform document states. “We will fight every effort to cut, privatize, or weaken Social Security, including attempts to raise the retirement age, diminish benefits by cutting cost-of-living adjustments, or reducing earned benefits.”

Social Security and Medicare together accounted for 41 percent of all federal expenditures last year and are expected to consume even more of the budget as more and more baby boomers retire in the coming decade. Trustees of the two largest entitlement programs recently reconfirmed that the Social Security retirement and disability insurance funds will be depleted by 2034 and necessitate reductions in benefits absent significant structural changes.

Clinton’s decision to embrace a major expansion of Social Security was prompted by Sanders’s remarkable success in rallying liberals and young people with a populist message – as well as his compelling message that many workers lack adequate pensions or retirement savings to make ends meet or avert being driven into poverty.

The platform puts Clinton, the former secretary of state and now the Democratic presidential nominee, on a collision course with Republican nominee Donald Trump and congressional Republicans over the fate of the retirement program.

Trump early in the primary season said he would oppose cuts in Medicare and Medicaid, seemingly echoing the sentiments of liberal Democrats and drawing kudos from senior advocacy groups.

However, Bloomberg reported that when Trump met with House Speaker Paul Ryan (R-WI) on May 12, he said privately that he favors cutting Social Security on moral grounds but knew that declaring it would seriously hurt his chances in November. The following day, Trump’s senior policy adviser Sam Clovis said during a conference in Washington that Trump would consider changes in Social Security and Medicare “after the administration’s been in place.”

Last week, the Republican delegates gathered in Cleveland were emphatic in saying that all entitlement programs, including Social Security, will be on the table in looking for long-term solutions to budget and debt problems. Ryan and other GOP leaders have long advocated changes in Social Security, including partial privatization of the system.

“We reject the old maxim that Social Security is the "Third Rail" of American politics, deadly for anyone who would change it,” the GOP platform states. “The Democratic Party still treats it that way, even though everyone knows that its current course will lead to a financial and social disaster. As the party of America’s future, we accept the responsibility to preserve and modernize a system of retirement security forged in an old industrial era beyond the memory of most Americans.”

Alex Lawson, executive director of Social Security Works, an advocacy group, said that voters will now have a clear choice to make between Democrats who want to expand Social Security and Republicans who want to reform it. He added, “We have always been skeptical of Donald Trump because he has made previous statements in his book and before that about Social Security being a ‘Ponzi scheme.’”

There have been no substantial changes in the Social Security system since 1983, during the Reagan administration, when the program faced a financial crisis. Congress adopted recommendations of a bipartisan commission headed by former Federal Reserve Chair Alan Greenspan. Those changes included a payroll tax increase, reduced spending and a change in the eligibility age.

Although their new platform doesn’t spell out all the details, Democrats are looking at ways to recalculate Social Security benefits, providing more generous monthly payments, and forcing wealthier Americans to shoulder a substantially greater share of the financial burden.

Currently, the 7.65 percent payroll tax used to finance Social Security and Medicare is limited to incomes of up to $118,000 a year, which means that wealthier Americans pay no more into the Social Security system than do middle-income taxpayers.

Sanders has introduced legislation that would substantially increase payroll tax revenue by lifting the cap so that everyone earning more than $250,000 a year would pay the 7.65 percent rate on all of their income above that level. The Vermont Democratic Socialist has also proposed raising additional revenue by imposing a new tax on investment income.

According to advocates of this plan, the change in the tax code would be enough toextend the solvency of the Social Security trust fund for the next half-century and bring in enough revenue to expand the average monthly payment to beneficiaries by $65.

The Democratic platform endorses that approach, as well as revising Social Security cost-of-living adjustments to take into account spending patterns of seniors that differ from the population as a whole, “particularly the disproportionate amount they spend on health care expenses.”

Because of the unusually low inflation rate, Social Security recipients did not receive an automatic increase in their monthly retirement and disability benefits, under the current cost-of-living adjustment formula based on the Consumer Price Index for Urban Wage Earners. If inflation continues to remain near zero, seniors likely will be denied another cost of living adjustment in 2017, according to analysts.

President Obama has considered proposals to curtail future Social Security benefits by changing the way cost-of-living increases were calculated, but Clinton and Sanders have rejected that approach. The Democratic platform highlights what it saw as inequities for seniors in the current COLA formula and declared that “We are committed to exploring alternatives that could be better and more equitably serve seniors.”

Washington Editor and D.C. Bureau Chief Eric Pianin is a veteran journalist who has covered the federal government, congressional budget and tax issues, and national politics. He spent over 25 years at The Washington Post.